Mattel 2011 Annual Report Download - page 32

assurance that Mattel will be able to identify suitable acquisition targets or merger partners or that, if identified, it
will be able to acquire these targets on terms acceptable to Mattel and to potential merger partners. There can
also be no assurance that Mattel will be successful in integrating any acquired company into its overall
operations, or that any such acquired company will operate profitably or will not otherwise adversely impact
Mattel’s results of operations. Further, Mattel cannot be certain that key talented individuals at those acquired
companies will continue to work for Mattel after the acquisition or that they will continue to develop popular and
profitable products or services. In addition, Mattel has certain anti-takeover provisions in its by-laws that may
make it more difficult for a third party to acquire Mattel without its consent, which may adversely affect Mattel’s
stock price.
Mattel relies extensively on information technology in its operations, and any material failure, inadequacy,
interruption, or security failure of that technology could harm its ability to effectively operate its business.
Mattel relies extensively on information technology systems, many of which are managed by third-party
service providers, across its operations, including for management of its supply chain, sale and delivery of its
products, and various other processes and transactions. Mattel’s ability to effectively manage its business and
coordinate the production, distribution, and sale of its products depends significantly on the reliability and
capacity of these systems and third-party service providers. The failure of these systems to operate effectively,
problems with transitioning to upgraded or replacement systems, or a breach in security of these systems could
cause delays in product sales and reduced efficiency of its operations, and significant capital investments could
be required to remediate the problem.
The level of returns on pension plan assets and the actuarial assumptions used for valuation purposes
could affect Mattel’s earnings in future periods. Changes in standards and government regulations could
also affect its pension plan expense and funding requirements.
Assumptions used in determining projected benefit obligations and the fair value of plan assets for Mattel’s
pension plan are evaluated by Mattel in consultation with outside actuaries. In the event that Mattel determines
that changes are warranted in the assumptions used, such as the discount rate, expected long term rate of return,
or health care costs, its future pension benefit expenses could increase or decrease. Due to changing market
conditions or changes in the participant population, the actuarial assumptions that Mattel uses may differ from
actual results, which could have a significant impact on its pension and postretirement liability and related costs.
Funding obligations are determined based on the value of assets and liabilities on a specific date as required
under relevant government regulations for each plan. Future pension funding requirements, and the timing of
funding payments, could be affected by legislation enacted by the relevant governmental authorities.
If Mattel’s goodwill becomes impaired, Mattel’s results of operations could be adversely affected.
Mattel tests goodwill for impairment annually, or more often if an event or circumstance indicates that an
impairment may have occurred. For purposes of evaluating whether goodwill is impaired, goodwill is allocated
to various reporting units, which are either at the operating segment level or one reporting level below the
operating segment. Declines in profitability of Mattel’s reporting units may impact the fair value of its reporting
units, which could result in a write-down of its goodwill, negatively impacting its results of operations.
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If any of the risks and uncertainties described in the cautionary factors listed above actually occurs, Mattel’s
business, financial condition and results of operations could be significantly and adversely affected. The factors
listed above are not exhaustive. Other sections of this Annual Report on Form 10-K include additional factors
that could materially and adversely impact Mattel’s business, financial condition and results of operations.
Moreover, Mattel operates in a very competitive and rapidly changing environment. New factors emerge from
time to time, and it is not possible for management to predict the impact of all of these factors on Mattel’s
business, financial condition or results of operations, or the extent to which any factor, or combination of factors,
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